Tag: Innovation

It’s not news that digital technology is driving rapidly changing consumer behaviour, and while it took some time for that shift to affect the economics of the media, the disruption is now in full swing. While the metered paywall has given a number of legacy media companies breathing room, to use the bump in reader revenue as a base to build on rather than a temporary reprieve from the dust heap of history will take focused, innovative thinking.

I’ve been involved in journalism innovation since 1996, when I took my first job as an internet news editor. I’ve held pioneering positions at major news organisations such as the BBC and The Guardian. Both of those organisations can be innovative in ways that have proven difficult for other media organisations because they aren’t purely commercial. How do other news organisations keep pace with their audience and just as importantly create new revenue opportunities?

Finally, success in legacy media companies (newspapers, magazines, TV, and radio) is driven by individual success – stardom – not by collaborative team success. The internecine, hand-to-hand combat inside legacy media companies is about who gets the credit for a hit or success, not about innovation or team success.

I’ve seen this first hand, and I used to say to colleagues, “Our real competition isn’t down the hall but across town” at one of the other newspapers, broadcasters or now one of the digital news and media startups.

This isn’t unique to media companies. Office politics is pretty universal. One of the benefits of having done consulting both inside and outside the media industry is that I have realised that positive corporate culture is rare and needs a lot of work. In media, you’ve got a lot of creative people, and journalism is populated with professional sceptics who question everything, including management’s latest change strategy.

However, that doesn’t excuse just how frankly, effed up the culture is at a lot of news and media companies. In the past, when owning a media company was a licence to mint money, we could afford these poisonous, dysfunctional cultures. We can’t anymore, and besides, it’s a lot more satisfying to succeed as a team than fight amongst ourselves on the decks of sinking ships.

On both sides of the Atlantic, the newspaper business is experiencing its own episode of back to the future, reverting to a past when billionaire sugar daddies buy and prop up ailing titles.

The motivations sit on a continuum from a public service minded sense of noblesse oblige all the way to treating media as something akin to a US super-carrier, as the ultimate tool to project power. The new class of owners include former KGB agents, hotel developers, hedgies and, of course, this week, Jeff ‘Vishnu’ Bezos, the creator and destroyer of retail business models.

Historians will simply say, twas ever thus, and point to the fact that we’re merely returning to an older model of ownership. But could newspapers have responded to the digital tsunami in any other way than they did?

The newspaper industry had a clarion call on how to respond to disruption, but like most disrupted industries, the industry has failed to adopt these strategies.

Clark Gilbert is former professor of entrepreneurial management at Harvard Business School and began working with Christensen to apply the Innovator’s Dilemma to newspapers more than a decade ago in 2002. Unlike other industries, which simply did not see the disruption coming, newspapers recognised the threat posed by the internet, but Gilbert said, “Unfortunately, threat-induced response also leads to very rigid behavior.”

He added:

We found that despite recognizing the problem, most companies aggressively “crammed” the new business into the old business model and sales processes. For example, most newspapers tried to force their online sites to make money by selling the same types of advertising to their traditional print advertisers. The early online advertisers were different and the type of advertising they sought was much more focused around the interactive and direct targeting attributes of the new media.

Threat had motivated action, but it was resulting in an aggressive replication of the newspaper business. Newspapers had spent a ton of money, with little to show for it. In an effort to defend their core market from attack, newspaper companies were missing the new emerging market altogether.

More than a decade ago, Gilbert also had statistical evidence that should have been a warning to newspaper executives that digital-legacy integration was not the answer to their problems. In fact, it was exactly the wrong thing to do. He said:

In our large sample study, sites that separate their online organizations from the newspaper were more than twice as innovative than sites that remained integrated into the newspaper. More importantly, these sites gained 60 percent higher market penetration!

In April, I heard Gilbert speak at the International Symposium of Online Journalism in Austin about how he has applied the insights from the Innovator’s Dilemma to the Deseret News in Utah, and he laid out why integration was absolutely the wrong approach to disruption.

“In industries that are being disrupted, 9 percent of companies make it,” he said. Of the 9 percent that made it, 100 percent had set up a separate disruptive business unit.

Separate means:

A separate physical location.

Separate profit & loss.

Separate direct sales.

Separate content product and technology teams.

Separate management structure.

However, it is important to understand that while Gilbert says integration is a mistake, potentially a fatal one for your company, he is not simply advocating a digital first strategy. Key to his strategy is a dual transformation, creating a new disruptive digital company while also transforming the traditional print product.

In his transformation of the legacy print and broadcast business, he said that it is important to understand that in the age of digital media, generalists are not as valuable as specialists. Local media should excel in this age, but instead they have suffered.

To help the newspaper find its USP, Gilbert used detailed market research to identify six core coverage areas. Yes, they slimmed down the legacy product, but they ploughed savings back into covering these six core areas that allowed them to create a differentiated product.

For the disruptive digital business, they are creating a company that looks beyond the twin revenue streams of advertising and paid content that dominate the income mix of most media companies.

“Its divisions include, but are not limited to, e-commerce, marketplace services, digital consulting and other emerging revenue streams in which tablets, mobile and social are integral parts,” the American Press Institute reported.

Instead of one struggling company, Gilbert is trying to create two dynamic companies. They do meet, but he keeps the interaction at a minimum. Otherwise, the legacy business often “suck(s) the life out of” the digital disruptive business, he told the American Press Institute, adding, “You don’t get excellent from either if they’re integrated.”

Of course, the US isn’t alone in examples where splitting the legacy and digital business delivered better results. In fact, one of the pioneers is Scandinavia’s Schibsted. In 1999, it decided to split its digital divisions from its newspapers, and it has gone to build one of the most successful media companies in the world by building one of the most successful digital classified businesses in the world. With operations in 28 countries, US analyst Ken Doctor reported in February of last year that Schibsted earns 36 percent of its revenue from digital.

Looking at the recent newspaper buyouts by billionaires, the real question should be whether they will do the same thing as their previous owners, sinking millions into a disrupted business or whether they will heed Gilbert’s research and create a separate disruptive digital unit. Maybe that’s where Bezos will breath new life into the Post with a resurrected Post Digital.

Guardian News & Media, the parent company for both newspapers, lost £33m on a cash basis for the year ending 31 March, only slightly less than it’s £34.4m loss for the previous year. Guardian Media Group chief executive Andrew Miller warned that the group could run out of money in 3-5 years if things don’t change. I heard sobering burn rate figures when I was at The Guardian. I covered the dot.com boom and heard start-ups talk cash on hand, but I never expected to hear this from a major media company.

Some things leapt out at me: They reported £47m in digital revenues out of a total of £198m revenues. Digital made just shy of 24% of total revenue. That’s good going, and most newspapers would kill for that percentage of digital revenues. (Apart from the FT, which is making a killing from digital: 30% or revenue from digital now and projected to reach 50% of revenue by 2013.)

This came out from the presentation to Guardian staff:

Unaudited results for the year ending 31 March showed that revenues at Guardian News & Media, the immediate parent of the newspapers and guardian.co.uk, fell to £198m last year compared with £221m the year before, a fall in revenues that reflected a sharp fall in classified advertising. Recruitment advertising has fallen by £41m in the past four years.

The Guardian is seen as one of the most innovative newspapers in the world. It was why I enthusiastically joined them in 2006. They announced they were going web-first in June 2006, but that didn’t and doesn’t change the fact that the newspaper is burning through cash. To future of journalism folks, The Guardian is indicative of challenges facing the industry, but so far it’s not showing the way forward in solving those challenges.

Feel free to give The Guardian credit for being innovative, but everyone in the journalism community has to be more honest and realistic about its business challenges. It’s in the same sinking boat as a lot of other newspapers.

Guardian Editor Alan Rusbridger is saying that not only will they publish first to the web but that they will do less in print. The Guardian’s article says there will be no job cuts, though they have to find £25m in savings. Yet Mathew Ingram at GigaOm quotes Alan as saying there will be editorial job cuts.

Mathew also quotes Alan as saying that they have identified at least ten different revenue streams. That’s comforting. But it speaks volumes that The Guardian’s own article doesn’t mention new revenue, and Alan only mentioned existing digital revenue streams to Mathew.

The Guardian needs an intervention. Digital first will not be enough to save it. It needs to remember that although they are supported by a trust, that is not a licence to completely ignore business realities. Here is my bit of tough love:

1. Building a sustainable business is not evil

The Guardian needs to realise that making money to support journalism is no sin. There is a lot of moral space between being a sustainable journalism enterprise and being a voracious media mogul like Rupert Murdoch. I’d love to see The Guardian demonstrate how to create a financially sustainable journalism business, but it will have to challenge its own anti-commercial culture.

2. Editorial innovation alone is not enough

The Guardian is innovative, but it also shows that technical and editorial innovation are not enough on their own to guarantee a sustainable journalism business. Digital first without a business focus will still leave it in dire straits. If The Guardian is going to devote 80% of its resources to digital, as is implied by Dan Sabagh’s article, it has got to develop new revenue streams to support its digital first strategy.

3. ‘Open’ without a business model is an empty ideology

I love the open web. I think The Times hard paywall is foolish. However, the ideology of open from The Guardian lacks pragmatism. The Rupert v Rusbridger battle makes a good media ding-bong, but neither positions are proving able to solve the problems that face newspapers. (Yes, I’ve seen Guardian digital strategist Matt McAlister’s presentation on generative media networks. Hopefully, some of that strategy will be part of these 10 revenue streams. At the moment, I remain unconvinced.)

4. You’ve got a golden brand. Capitalise on it.

At the risk of sounding critical, I joke with people that The Guardian has the brand of Apple but the business focus of Twitter. Guardian readers are some of the most loyal in the world. When The Guardian recently cut short its well regarded local project, readers offered money to help it continue. Most newspapers would love to have that affection and loyalty. If The Guardian can’t capitalise on its loyal audience, incompetence will be the only explanation.

A friend of mine, who had taken a buyout from a US newspaper, said to me after visiting The Guardian a few years ago:

The Guardian seems like a great place to work when the times are good, but it doesn’t seem capable of making the tough decisions when the times are tough.

The Guardian has time to make some relatively easy decisions to ensure its future, but it needs to get serious, not just about digital but about its business. The Guardian’s often lauded as the future of journalism, but without a sound business model, it doesn’t have a future.

Tomorrow I fly to Washington ahead of the Online News Association conference. I’ll be doing a pre-conference session next Thursday on real-time coverage with Kathryn Corrick, digital media consultant and ONA UK Chair, Gary Symons of VeriCorder Technology. Kathryn is going to focus on desktop-based real-time coverage. There is a lot that is possible from the newsroom, and often when you’ve got a lot of journalists in the field, you need someone back at base to help collate and curate all the content. Gary is going to focus on multimedia, especially some of the tools that Vericoder offers. I’m going to focus on a wide range of mobile tools and techniques highlighting some of the examples of what news organisations and innovative journalists are doing.

Two years ago, I was traveling across the US on my way to Washington covering the 2008 elections. It was my third presidential election. I covered the 2000 and 2004 elections for the BBC. Every election, the mobile technology got a little more sophisticated and a lot more portable.

In the 2000 election, Tom Carver and I traveled across the US in six days answering questions from the BBC’s international audience. We used portable satellite technology, a mini-DV camera and webcasting kit to do live and as-live webcasts. The satellite gear was similar to what would become standard for live video feeds from Afghanistan. We used it in much less threatening locales such as a bar in Miami to talk to college students about apathy amongst youth. The gear weighed about 70 pounds, and it was a bit temperamental. I had to buy a toolkit in Texas and perform emergency surgery in a Home Depot parking lot. That definitely wasn’t in the job description when I was hired, but we got the job done.

In 2004, everything had changed. I used an early data modem to file from the field. The BBC content management didn’t quite work in the field, but we could at least send text and images. Richard Greene and I worked to engage our audiences, again fielding their questions and bringing them along on our journey. I blogged through election day, and that blogging experiment would send my career in a radically new direction.

It would be 2008 when I finally realised my dream of being able to work almost constantly on the move publishing via Twitter, Flickr, Facebook and the Guardian blogs via a laptop and mobile modem and a state-of-the-art multimedia mobile phone, the Nokia N82 . The picture above shows my road trip kit. It did more with much with so much less weight than the gear I lugged around in 2000. I could fit it all easily in a backpack. I had my laptop, a data modem, a power inverter, a Nikon D70, a geo-tagger and my Nokia. I geo-tagged all of my pictures, posts and most of my tweets. Before anyone knew what Foursquare or location-based networks were, I saw an opportunity to geo-tag content to map it and eventually deliver relevant content to where people are. I have a detailed explanation of how I did it.

The trip was the realisation of a journalistic dream; I could report live while staying in the middle of the story. I could use my phone to tweet and upload pictures from the celebrations on the streets of Washington. This was two years ago. The technology has moved on, and now it’s easier and the the video, images and audio are better. It’s now easy to broadcast live video with nothing more than a mobile phone.

We’ll cover the latest developments and then go out on the streets of Washington just days before Americans go back to the polls in this critical midterm election. There are a still a few slots left so if you’re coming, come join us from 2-5 Thursday 28 October.

With just two weeks of cash left, Frédéric Filloux described the crisis at Le Monde as “the textbook example of the evolution of French press over the last years”. He then went point-by-point the problems afflicting Le Monde in particular but the French press in general:

A steady erosion in readership.

A lack of budget discipline, made worse by loose governance.

The core newsroom’s reluctance to support the digital strategy

The collective certainty the “brand” was too beautiful to fail and that a deep-pocketed philanthropist will inevitably show up at the right time to save the company.

An difficulty to invest into the future, to test new ideas, to built prototypes, to coopt key talent or to invest in decisive technologies.

A bottomless investment in the heavy-industry part of the supply chain, in costly printing facilities.

An excessive reliance on public subsidies which account for about 10% of the industry’s entire revenue. Compared to Sweden, French newspapers have 3 times less readers, but each one gets 5 times more subsidies.

In terms of a lack of budget discipline, I would only point to the industry in the US giving bonuses to execs while the companies were entering or operating under bankruptcy. As Robert Picard pointed out a year ago:

The Tribune Co. is trying to pay out $13 million in bonuses, the Journal Registers Co. is trying to pay $2 million, and Philadelphia Newspapers has already given hundreds of thousands in bonuses to its corporate officers.

As for lack of support in the core newsroom for digital strategies, I’d suggest that the current problem exist in a layer of powerful editors who believe they have the most to lose in any change. Rather than fully understand, much less support, the digital strategy of their organisations, they see it in their own best interest to protect the status quo and obstruct change, even as it leads to job losses and uncertainty over their own future. It is self-interest and short-sightedness to the extreme, but for them, it seems a rational decision.

Ah, the belief in the beauty of the brand, it is so endemic in media organisations that they can’t understand why their circulation is in decline. Surely in this age of a multitude of media choices, our brand, our quality will prevail, they say. Look at your books and your circulation, how’s that working for ya? Only a fool clings to a failing strategy, and the industry has more than enough fools to fill a ship.

Difficulty investing in the future, to experiment with new ideas, expensive investments in the past. Yes, yes, yes. It’s a textbook for more than France. About the only one that stands out as not generally applicable is the subsidy, and for those in the US and the UK looking for their own government bailout, it is instructive that while subsidies might help for a while, they are not a long term solution.

The industry has resisted fundamental change for so long. They believed that they could outrun the future with their brand, their quality and their market position, but they can’t. It is adapt or die, and if you wait long enough, you’ll be in the same position as Le Monde, with only two weeks of cash left and suddenly a room empty of suitors.

I honestly don’t believe most in the newspaper industry have the ability to make the changes necessary. They certainly haven’t demonstrated that in the past. In terms of the business of newspapers, they have proven that they can milk the business model for a little bit longer through cuts and consolidation. Bankruptcy will given them another go around, but it won’t fundamentally change the business environment that caused the collapse in the first place. The process will enrich a few but leave many journalists looking for something else to do.

As for me, I love journalism too much. I wasn’t going to wait around and watch anymore of this slow motion disaster. There are other ways to create a future in journalism and a future for journalism, and I’m loving have a chance to explore them.

…if curation is king in online journalism I guess I missed the coronation. Curation is a usurper, here to distract us from the bloody mess we’re in with the message ‘Business as usual’.

The future of journalism and publishing will not be curation, aggregation, the iPad OR mobile. It will be a strategic mix of these things and more depending on the market and the audience. As Adam says:

There is no easy answer, otherwise we’d have found it after over a decade. Complexity is the new reality. Clichés are just a crutch.

Clichés are much worse than that. Seemingly easy answers too often win internal debates, especially as Paul points out, some of these messages convey that ‘business as usual’ is an acceptable course of action.

Sit down once a day and pray to thank Steve Jobs that he is saving the publishing industry.

That’s the problem. Senior leaders in the industry aren’t looking for strategies, they are looking for a saviour. They want some supernatural – or in lieu of that, legislative – power to turn back the clock, put the genie back in the bottle, tax the internet and go back to the good old days when money just fell from the sky into their coffers. News flash: It’s too late. The good old days aren’t coming back. Anyone who tells you that you can continue doing what you’ve always done and that the solution is easy is lying. They care more about their current position than they do the future of journalism.

Again, this is a live blog. I’ll try to tidy things up later. I’m trying to do as many of these speakers as possible. I might miss a few.

Joi wanted to start first to frame the discussion. New media is fundamentally different than old media. Media is about access, and the business model defines the media. Looking at newspapers and satellite TV, it costs a lot of money. The big difference with new media is that it has significantly lowered the cost to create media and to connect. It’s fundamentally different than the past. To understand how it’s different and why it’s different. The architecture of the internet is open.

Before the internet, governments, corporations and experts create specifications. They costs millions of dollars. They are robust and they sell products an services to consumers and they pay fees to services. Telecommunications companies are still big business in the Arab world, even for governments.

In the internet, you have users, venture capitalists, standard organisations and a credo “Rough consensus running code”. It evolves over time. Internet standards are lighter weight than in the past.

The internet “open stack” consists of the internet protocol. The proprietary standards for networking gave way to the internet protocol. The standards for IP are shepherded by the IETF. Anyone can participate. It’s a very open system. The World Wide Web is another standard shepherded by the IETF. W3C is the standards body. It’s an ad hoc committee without specific government standard. Governments are uncomfortable that there is no government involvement in the web standard.

Creative Commons looks at the copyright layer. The copyright system used to make sense.

We are trying to create an open stack for the legal layer.

The other section is open source software. Open source and free access to the university network. Google ran a web server, probably Apache, and they accessed Stanford’s network. A couple of students built Google thanks to open source software. It existed before the internet, but the internet allowed people to connect with each other to build this software.

He next highlighted open video. YouTube and other sites, most of them use Flash. It’s proprietary. You can’t participate in this video internet stuff without permission. In HTML5, we were working very hard on video initiatives for open video. Google acquired a company that had a video technology called VP8. This is going to be the core video technology in an open video format called WebM. This is going to be a significant change in the video structure. (It looks like VP8 is being challenged by MPEG-LA, the vide licencing body for the MPEG standard.)

Giving things away for free doesn’t seem like a great business model. However, Creative Commons give users a choice in how they want they want their work used. He quickly walked through the different types of Creative Commons licence. Free is not just about not making money. Nine Inch Nails released a CD called Ghost. They gave their music away for free. They used an attribution Non-commercial share alike licence. They created their own site instead of selling it through a company. It’s about taking more money from fewer people. They made $6m. (I need to check that figure.) UPDATE: I checked that figure after the talk, and Joi said NiN made $1.6m in a week.

Al Jazeera has released content under Creative Commons. Until last year, it didn’t use the Creative Commons licence. It used a Free Software Foundation licence for creating computer manuals.

Joi said that he’s worried about licence proliferation. He talked about different organisations creating ‘vanity licencing’ schemes. The White House now uses a Creative Commons licence.

Does that mean newspapers can’t make any money? Not at all. I think Mike Masnick has done a great job of pointing out how a media business can make money even if it gives content away for free — his company Techdirt does it, plenty of musicians and artists do it. And they do it by using the free content to promote the aspects of their business that have *real* scarcity rather than artificial scarcity.

After the Great Recession, news organisations are all seeking news sources of revenue and a more diversified revenue base so that we’re not as dependent on one highly recession-sensitive revenue stream, advertising.

As we look for new revenue streams, journalists need to get real about what adds value and need to be brutally honest about real scarcity. Currently, too much of the paid content discussion is obsessing over the societal value of journalism and not about rebuilding a revenue bundle that supports the socially valuable work that we do. Non-niche news has always been subsidised by other content and revenue streams. It is not dirty and it doesn’t devalue the social mission of journalism to think in terms of what other services and products we will need to develop to support that social mission. I’m more than happy for lifestyle news and food blogs to pay for investigations and bread-and-butter daily journalism. In many ways, it’s the simple recognition that our audiences are interested in many things, not just hard news.

Last week, speaking at the Norwegian Online News Association annual meeting, one of the points made by my fellow panelists was that news organisations have created a lot of innovative editorial projects but not many innovative commercial products. There are a lot of opportunities for news organisations to develop niche news and information products, but we best move quickly. Niche sites and services have already set up a dominant presence in many key content verticals. We also best move quickly on developing mobile apps, desktop apps and other tools to distribute our content and allow for easy recommendation. Steve Outing, for one, sees a lot of possibilities in mobile news and information services. What possibilities do you see to help pay for the social mission of journalism?